Republican Congressman Patrick McHenry, US Representative for North Carolina’s 10th Congressional district, has written to the US Securities and Exchange Commission (SEC), seeking clarification on digital assets regulation.
McHenry, also the ranking member of the House of Financial Services Committee, stated in a letter addressed to SEC Chair Gary Gensler that the latter has been making contradictory remarks about crypto assets.
The Congressman outlined multiple instances indicating Gensler’s indecisive stance on cryptocurrency regulation, particularly cryptocurrency exchanges and stablecoins.
Gensler on the Spot for Lack of Clarity on Crypto Exchanges and Token Offerings
While testifying to the Financial Services Committee in May, Gensler said that there are gaps in the regulation of crypto exchanges that only Congress could address. He added that digital assets investors could benefit from more oversight on such exchanges.
A few days later, Gensler said in an interview with CNBC that there is no federal authority to sufficiently regulated crypto exchanges in the US, except for limited anti-fraud and anti-manipulation oversight by the Commodities Futures Trading Commission (CFTC). Gensler added that it was up to Congress to protect people interested in investing in digital assets.
Again in August, Gensler stated that the SEC had enough regulatory oversight over crypto exchanges since a majority offer tokens that could be characterized as securities.
In a much recent hearing before the Senate Committee on Banking, Gensler testified that there are existing gaps on lack of clarity on the definition of security arising from poor coordination between regulatory authorities.
Apart from tokens, Gensler added that crypto exchanges carry other assets that could be classified as securities, including investment contracts and notes.
“In light of the robust ongoing discussion about potential regulatory gaps within the digital asset ecosystem, your evolving statements on the SEC’s authority have caused significant confusion for market participants and stakeholders in Congress.”
Is SEC requesting Congress to help to regulate stablecoins?
McHenry also considered Gensler’s comparison of stablecoins to “poker chips at the casino” as inaccurate. Gensler was speaking during an interview with the Washington Post on 21st September 2021, adding that stablecoins have different attributes where some could be classified as investments contracts and others as banking products.
“But the banking authorities right now don’t have the full gamut of what they need, and how we work with congress to sort through that.”
According to McHenry, Gensler’s remarks suggested that the SEC is requesting help from Congress to have more power to regulate stablecoins. The Congressman now wants the SEC to answer six questions about the agency’s exact stand on crypto exchanges and stablecoins before 19th October 2021.
The questions address all the pain points causing confusion, including:
1. Whether the SEC feels that it has enough power to regulate cryptocurrency exchanges.
2. Whether the SEC should indict crypto exchanges for offering tokens that the SEC comes to classify later as securities.
3. Whether the SEC classifies tokens as securities and fails to make this information public immediately.
4. Whether there are any stablecoins that the SEC currently considers securities and how the agency arrived at those analyses.
5. What are the gaps causing confusion and lack of clarity between agencies, and whether the SEC requires additional help from Congress to close those gaps.
McHenry has actively been pushing for increased clarity on cryptocurrency regulation throughout the year.
